Scuttlers Scuttled

"I want it understood," said New York's bald little Governor Herbert H. Lehman last week, "that in no way do I subscribe to the theory . . . that because a bill has been passed by two successive Legislatures it is my duty to sign it." Thereupon, for the second time in a year, Governor Lehman vetoed a bill which would have scuttled the Federal receivership business of New York City's biggest bankruptcy trustee--Irving Trust Co. of Manhattan. In open legislative hearings, before it was passed by a large majority, a committee chairman had blessed the bill with the remark: "We are not a damned bit interested in business men." Irving Trust Co. was even less interested in bankruptcies when it reluctantly began handling them for the Southern New York district in 1929. It was put into the business, on grounds of public service, by Federal Judge John Clark Knox after a series of unsavory scandals had discredited the activities of unscrupulous bankruptcy lawyers. As in all honestly-managed bankruptcies, profits were slim. Never has there been any serious charge of corruption or mismanagement, the trust company having spent only 20% of realized assets on administration, as against 34% by other receivers, and paid 57-c- on the dollar as against 49-c- by others. But lawyers who lost a lucrative business have yowled long and loud against appointing a corporation trustee in bankruptcy cases. It was useless for Judge Knox to point to the able administration of Irving Trust's receivership department. The fight surged into the Legislature, 66 of whose members are lawyers. Last year a bill to strip Irving Trust of its bankruptcy business was passed and promptly vetoed by the Governor. Last week's bill was the product of Senator John J. McNaboe, vociferous Tammanyite. It stipulated that no domestic or foreign corporation could be appointed as receiver or trustee in any bankruptcy case.

Said Governor Lehman in his veto: "I shall not undertake to determine the merits of the controversy as to whether a corporation should or should not act as receiver or trustee. . . . The fact is that the judges of the Federal Court of the Southern District . . . adopted the rule centering receiverships and trusteeships in bankruptcy in the hands of one corporation. If a change is desired, the judges of that court may make the change, or the change may be made by action of Congress. It is not for this State to change by indirect means a rule made by a Federal Court. ..."

Senator McNaboe promptly announced that the Legislature was going to override the veto. If it does, it will be the first time in 16 years.

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